Asked by Paula marques on Jun 05, 2024
Verified
Which one of the following variables influences the value of put options?I) Level of interest ratesII) Time to expiration of the optionIII) Dividend yield of underlying stockIV) Stock price volatility
A) I and IV only
B) II and III only
C) I, II, and IV only
D) I, II, III, and IV
E) I, II, and III only
Dividend Yield
A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
Volatility
A statistical measure of the dispersion of returns for a given security or market index, indicating the degree of variation from the average.
- Evaluate how diverse variables, including dividend policies, interest rates, time until expiration, and the volatility of stock prices, influence the worth of call and put options.
Verified Answer
SZ
sydney zajacJun 07, 2024
Final Answer :
D
Explanation :
All four variables influence the value of put options. Interest rates affect the cost of carrying positions, time to expiration affects the time value, dividend yield influences the underlying stock's expected price changes, and stock price volatility affects the option's potential to end in the money.
Learning Objectives
- Evaluate how diverse variables, including dividend policies, interest rates, time until expiration, and the volatility of stock prices, influence the worth of call and put options.
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